Tan v. Goldman Sachs Group Inc.

Background

The court was handling seven related securities actions involving different issuer defendants. It had previously ordered the actions to be closely coordinated, but not fully combined into one case. The court then considered motions to appoint lead plaintiffs and lead counsel in each action under the Private Securities Litigation Reform Act (PSLRA).

The court received six timely unopposed motions and two competing motions in the action identified as the Tencent Action, docket number 21-cv-08752. Seven motions, including one of the two Tencent motions, were submitted by the same consortium, called the Plaintiffs Group. The opposing Tencent motion was filed by Michael Krueger. The court stated that the Plaintiffs Group included the movants claiming the largest loss in six of the seven actions and the movant claiming the second-largest loss in the Tencent Action.

Legal standards

The PSLRA directs the court to appoint the person or group most capable of adequately representing the class. The statute creates a presumption in favor of a timely movant with the largest financial interest who also makes the required preliminary showing under Rule 23 of the Federal Rules of Civil Procedure. At this stage, the court focused on typicality and adequacy. Adequacy concerns whether the proposed lead has no conflict with the class, has sufficient interest in the case, and has selected qualified counsel.

The court also explained that lead plaintiffs select class counsel, subject to court approval. It stated that courts generally give substantial weight to a properly selected lead plaintiff’s choice of counsel, while avoiding duplication of legal services, fees, or expenses. The court further considered factors relevant to appointing groups of co-lead plaintiffs, including group size, relationships among members, cooperation plans, sophistication, and whether the group selected counsel rather than counsel creating the group.

Rulings on lead plaintiffs and counsel

For docket numbers 21-cv-08413 (Vipshop), 21-cv-08618 (Gaotu), 21-cv-08897 (ViacomCBS), 21-cv-10286 (iQIYI), and 21-cv-10791 (Baidu), the court found that the Plaintiffs Group movants timely filed, claimed the largest loss in their respective issuer classes, and made unrebutted preliminary showings of typicality and adequacy. The court also found them willing and capable of working with the other proposed leads. It granted the motions to appoint leads and approved the proposed lead counsel.

For docket numbers 22-cv-00169 (Discovery) and 21-cv-08897 (ViacomCBS), the court granted the unopposed motions seeking co-lead plaintiffs. It found that the proposed groups were relatively small, sufficiently sophisticated, and focused on cooperation, and that there was no evidence of bad faith. The court also approved the proposed co-lead counsel in the Discovery and Gaotu actions because it found no indication of duplicated services or increased fees and expenses.

In the Tencent Action, Krueger alleged a loss of $163,233.53, which the court said was nearly twice Zhang Zhenming’s alleged loss. Even so, the court found Krueger inadequate because his and his counsel’s adversarial posture toward the other plaintiffs raised concerns about conflicts and the ability to work cooperatively. The court stated that cooperation was important to avoid unnecessary legal costs, delay, uncertainty, and infighting across the coordinated actions. It therefore found that Krueger was inadequate under Rule 23 and that he had rebutted the PSLRA presumption in his favor.

The court denied Krueger’s motion to be appointed lead plaintiff. It granted Zhang Zhenming’s motion, finding that he made an unrebutted preliminary showing of typicality and adequacy and had the largest financial interest among the adequate Tencent movants. The court approved Zhang’s selection of Pomerantz LLP as lead counsel.

Appointments and case-management structure

The court ordered the following appointments:

- 21-cv-08413 (Vipshop): Alexander Shapovalov, with Johnson Fistel LLP as lead counsel. - 21-cv-08618 (Gaotu): Syed Zaheer, with Berger Montague and Rosca & Scarlato LLC as lead counsel. - 21-cv-08752 (Tencent): Zhang Zhenming, with Pomerantz LLP as lead counsel. - 21-cv-08897 (ViacomCBS): The Kellner Newcomer Family Partnership and Felix Urman, with Pomerantz LLP as lead counsel. - 21-cv-10286 (iQIYI): Yan Cai Jiang, with Scott+Scott Attorneys at Law LLP as lead counsel. - 21-cv-10791 (Baidu): Dr. Jeffrey Wachtel, with Hedin Hall LLP as lead counsel. - 22-cv-00169 (Discovery): Oklahoma Firefighters Pension and Retirement System, Oklahoma Law Enforcement Retirement System, and Jamal Pesaran, with Grant & Eisenhofer P.A. and Scott+Scott Attorneys at Law LLP as lead counsel.

The court approved the Plaintiffs Group’s proposed Plaintiffs’ Executive Committee, consisting of Scott+Scott Attorneys at Law LLP, Hedin Hall LLP, Pomerantz LLP, Johnson Fistel LLP, Berger Montague PC, Grant Eisenhofer P.A., and The Schall Law Firm. It also approved Thomas L. Laughlin, IV and David W. Hall as co-chairs and coordinating counsel, along with the proposed structure for prosecuting the coordinated cases. Lead plaintiffs may ask the court to modify that structure if necessary to ensure that control remains with the lead plaintiffs rather than their lawyers.

The court ordered the lead plaintiffs to file amended complaints in each action within 60 days of the order. It also directed coordinating counsel and defense counsel to submit a proposed schedule for briefing motions to dismiss within seven days. The court expected to address those motions in a single opinion.

Disposition

The court granted the Plaintiffs Group’s motions, as modified at the end of the order, and denied Krueger’s motion. This order addressed leadership and case management; it did not decide the merits of the underlying securities claims.